How Vancouver's Payfirma, facing a crowded mobile payments market, is trying to set itself apart

Payfirma is looking to push into the crowded U.S. market where it will face stiff competition from the likes of Square Inc. and PayPal's Braintree, both of which offer similar services on a much larger scale

The rise of the digital wallet has made mobile payments a hot sector, and Vancouver-based Payfirma Corp. wants to get in on the action.

The startup offers payment solutions that allow businesses to accept credit and debit card payments online, in store and on handheld devices, and IDC Canada estimates its 2013 revenue at $20 million. Payfirma is now looking to grow, and plans to push into the crowded U.S. market where it will face stiff competition from the likes of Square Inc. and PayPal’s Braintree, both of which offer similar services on a much larger scale.

To help it compete, Payfirma has hired Yves Millette as chief operating officer. A management veteran, Millette helped guide growth for both Kodak and Intuit Canada and U.K. He also works as a consultant for business advisory firm CEOGlove Ltd., where he helped coach FreshBooks, a Toronto-based cloud-accounting company, and Payfirma.

Payfirma CEO Michael Gokturk is hoping Millette can lead the payments company to “hyper growth,” which includes its U.S. expansion, organic growth and a possible IPO.

“Yves has got tremendous experience in helping companies scale, regardless of their size,” says Gokturk, who admits Payfirma is up against well-entrenched and well-financed companies with up to 30 years of experience.

That reality hasn’t escaped analysts’ attention, with several noting that Payfirma’s offerings are similar to what is already available on the market.

“Payfirma does not offer features that are not available from a wide range of competitors,” says Robert Smythe, payments industry analyst for IDC Canada. “The key question is can they create a more attractive package of features and can they get them to market ahead of competitors. Speed is critical if they succeed, as success will result in competitors quickly emulating them.”

Square, Inc. valued last year at US$6 billion, reported at the time that it was already processing payments of up to US$30 billion. Victoria-based Beanstream has been processing $30 billion in payments annually since 2000, while Braintree, which was acquired by PayPal in 2013 for US$800 million, was processing payments of up to US$12 billion at the time of its acquisition.

Payfirma says it can exceed $1 billion in payments processing this year, and expects revenues to double each year over the next few years.

The majority of those transactions come from Canada: 90 per cent of Payfirma’s business is domestic, with the rest in the U.S. Gokturk says, adding that he wants this market mix to get to almost 50-50.

But to get there will be a challenge.

“It’s a hard market to break into,” Smythe says. “There are some heavy investments made by astute VC (venture capital) companies.… (Payfirma) really needs a global strategy … because for all these online payment systems, it’s not a local play; it’s a global play.”

“I see nothing in Payfirma’s offering that makes it stand out as being particularly suited for hyper growth by any means. I also would expect Square to go through an IPO much more quickly than Payfirma might,” he added.

Millette is unfazed. He told the Financial Post that instead of focusing on Payfirma’s competitors as COO, he will focus on the company’s vision for their customers.

“That vision is one where Payfirma will simplify the process of getting paid, help our customers grow their business while delivering all of that in a complete transparent way,” Millette said, adding that Payfirma will enable customers to accept more forms of payment, including PayPal and Bitcoin, and consolidate payment transactions in one dashboard.

Gokturk’s confidence in Millette is well founded. Under Millette’s guidance, Intuit Canada and U.K. saw revenue increase to $160 million from $65 million. As former general manager of Kodak’s commercial inkjet business, he helped grow the division’s revenue to US$140 million from US$18 million.

Payfirma has the money to forge ahead with its growth plans. It recently received $13 million in series-A funding, bringing investments to over $26 million to date. The company earlier said the funding would allow it to “hire A-plus players” and grow its business.

“The IPO would not be a finish, it would be more to fuel the company’s continued pace of organic growth. We are heavily acquisitive right now, looking at acquisitions in Canada and the United States,” Gokturk said.

“If an IPO can help us meet those goals faster, then we would consider it. But only if the market is receptive to it, only if there’s sufficient demand for Payfirma’s stocks to go to a public market. We’ll do it if the timing is right.”

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